Foursquare, Quora, Path: What Becomes Of The Underachievers?

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Foursquare, Quora, Path. Each is (or was) a Valley darling; each has millions of loyal users; each has raised more than $50 million, albeit nontraditionally, and been valued at $400 million or more — and each has recently done something remarkable. Foursquare and Path pivoted, hard. Quora, bizarrely, joined Y Combinator.

Which leaves it seeming more than a little unfocused. The main Foursquare app has essentially become a Yelp competitor. Swarm is now a side business, presumably because check-ins are no longer a growth industry, and haven’t been for some years now. Foursquare is allegedly on course to bring in $30-$40 million in revenue this year, which sounds good — but is not a lot for a company which has raised morethan $160 million at valuations north of $600 million … if its growth has slowed.

Again, an odd sudden change of direction for a four-year-old company which has raised $65 million. Everyone loves messaging apps today, in principle, thanks to WhatsApp — but the world already has Line, Viber, Kik, Snapchat, WeChat, Tango, etc, to say nothing of Facebook, Twitter, and Skype. It’s hard to see how (maybe) the sixth-place social network, which has struggled with layoffs and executive exits, benefits from branching out to become (maybe) the thirteenth-place messaging app. But Path has to do something … if its growth has slowed.

Quora is the strangest case of all. Why join Y Combinator? I mean, it didn’t cost them much, and it’s nice that it’ll be “fun personally to participate” for Adam D’Angelo, but how is it anything other than a distraction? “We’ll have Sam and all the other partners to help us,” D’Angelo says, without specifying what kind of help they want.

I think we can all make a pretty good guess, though. Quora was recently valued at some $900 million, but as Josh Constine puts it:

Quora has been cagey about its stats since forever, only talking in relative growth and vanity metrics rather than absolute user counts … This makes it tough to know exactly how popular it is, but the general consensus hovers around “known amongst Silicon Valley intellectuals” and “just not big enough”.

Joining YC might seem weird or even desperate, but weird or even desperate is actually the right move for Quora … if its growth has slowed.

You might be noticing a theme here.

As Paul Graham once put it: “A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup.” But, similarly, just because you’re “late-stage” — big, massively well-funded and relatively mature — doesn’t mean you’re not a startup. A corollary of Graham’s definition is: if you need to grow fast, then no matter how big you are, you’re still a startup … meaning you’re still extremely vulnerable.

Foursquare, Path, and Quora don’t yet have mature business models lucrative enough to justify their funding and valuation. Meaning all three are still startups, and have no choice but to keep growing, fast. That’s a huge challenge. It’s relatively easy to double a userbase when it numbers in the thousands; much harder when it’s already in the millions, unless you benefit from network effects. Doubly so when you’ve lost your cool and become yesterday’s news, no longer the talk of the Valley’s chattering classes:

Foursquare, Quora, Path and all that generation of apps are also gone from my iPhone (a few months ago, actually)

Does it sound like I’m being hard on them? That is not my intent. All three companies have done genuinely extraordinary things. They have scaled from scrappy outsiders into significant players. They have millions of faithful users. While it’s true they have succeeded well within their founders’ wildest dreams, they are still among the best of the best, or they wouldn’t have gotten to where they are today.

But the lesson here is that even that’s not good enough. Not if you stop growing before you start making money. Today’s tech industry will eagerly accept hypergrowth in lieu of revenue, but it will not accept neither. If you’re not yet raking in money, then you must grow, and keep growing, fast … or suffer and eventually die. And the bigger you are, the harder it is to keep riding the hockey stick — and the harder you fall if you fail.